Internal Revenue Code Section 79 Imputed Income
Value of Group Term Life Insurance Over $50,000 Is Taxable
The value of group term life insurance provided by one or more employers is considered taxable income in the
current year to the extent that the insurance coverage exceeds $50,000. The Church Pension Fund provides
group term life insurance coverage for all eligible clergy active in The Church Pension Fund Clergy Pension Plan.
That coverage is based on six times Total Compensation (as reported to The Church Pension Fund), up to a
maximum of $150,000, rounded to the nearest $500. Retired clergy group term life insurance coverage is based
on six times Highest Average Compensation (HAC) as determined by The Church Pension Fund, up to a
maximum of $50,000, rounded to the nearest $500.
Active lay employees participating in The Episcopal Church Lay Employee’ Defined Benefit Retirement Plan are
provided coverage up to $50,000 (two times salary with a maximum of $50,000, rounded to the nearest $500).
Active clergy and retired clergy who receive additional group term life insurance from a diocese, church, or other
employer may have an additional income tax liability each year. Contrary to popular belief, this tax liability is not
based
on the actual cost of the group term life insurance. The Internal Revenue Code includes a table that must
be used to
determine the value of this benefit.
Cost per $1,000 of All Group Term Life Insurance
Coverage per Month Exceeding the $50,000
Exclusion
Age
Monthly Cost
Under 25 $.05
25 to 29 .06
Example: An individual age 46 is provided with
$100,000 of group term life insurance; $50,000 of that
coverage will be taxable because it exceeds the
$50,000
tax exclusion. The imputed income on that
$50,000
would be calculated as follows:
1.
Obtain the monthly cost of $1,000 of coverage
for a 46-year-old from the chart ($.15)
2.
Multiply the monthly cost by 12 to obtain the annual
cost (.15 * 12 = $1.80).
*Note that if the insurance coverage was provided for less than a
year, you would multiply the monthly cost by the number of
months
the coverage was provided to the individual.
3.
Multiply the annual cost by each $1,000 of group
term
life insurance in excess of $50,000 (50 * $1.80
= $90).
The amount of the imputed income associated with
$50,000 of taxable group term life insurance
provided
to a 46-year-old is $90.
Each employer (diocese, parish, institution, or other employer) should provide employees with a Form W-2 that
includes the appropriate imputed income amount. However, individuals are responsible for reporting this imputed
income when filing their personal income tax returns even if they do not receive a Form W-2 containing this
information.
This table was provided by the Internal Revenue Service’s Publication 15-B for use in 2021 (dated February 05, 2021). We recommend that you
consult with your tax advisor.
This document is provided to you for informational purposes only and should not be viewed as investment, tax, or other advice. In the event of
a
conflict between the information contained in this document and the official plan document or policy, the plan document or policy will govern.
The
Church Pension Fund and its affiliates retain the right to amend, terminate, or modify the terms of any benefit plans described in this letter
at any
time, without notice, and for any reason.
Internal Revenue Code Section 79
Imputed Income on Group Term Life Insurance
30 to 34
.08
35 to 39
.09
40 to 44
.10
45 to 49
.15
50 to 54
.23
55 to 59
.43
60 to 64
.66
65 to 69
1.27
70 and Older
2.06
